Note: Allowance for Doubtful accounts is a contra asset account, means it is the opposite of assets, so it reduces the value of accounts receivable.

Chapter $7$ Assignments

The ledger of Costello Company at the end of the current year shows Accounts Receivable $$110,000,$ Sales Revenue $$840,000,$ and Sales Returns and Allowances $$20,000.$ Instructions $($a$)$ If Costello uses the direct write$-$off method to account for uncollectible accounts, journalize the adjusting entry at December $31,$ assuming Costello determines that L$.$ Dole$$s $$1,400$ balance is uncollectible. $($b$)$ If Allowance for Doubtful Accounts has a credit balance of $$2,100$ in the trial balance, journalize the adjusting entry at December $31,$ assuming bad debts are expected to be $(1)1\%$ of net sales, and $(2)10\%$ of accounts receivable. $($c$)$ If Allowance for Doubtful Accounts has a debit balance of $$200$ in the trial balance, journalize the adjusting entry at December $31,$ assuming bad debts are expected to be $(1)0\mathrm{.}75\%$ of net sales and $(2)6\%$ of accounts receivable.